Hindustan Unilever in talks to buy Indulekha hair oil for Rs.500 crore

by / Friday, 09 October 2015 / Published in News & Updates

 Hindustan Unilever Ltd (HUL), India’s largest maker of consumer products, is in advanced discussions with Mosons Extractions Pvt. Ltd to buy the Indulekha brand of hair care products, including an ayurvedic hair grooming oil and shampoo, for around Rs.500 crore, according to two people close to the development.

Several companies, including Wipro Consumer Care and Lighting and L Capital Asia Advisors Plc. (an Asian PE fund sponsored by Moët Hennessy Louis Vuitton SA, dropped out of the race to acquire Indulekha citing valuation-related concerns, added the two people, who asked not to be identified. The owners of Mosons Extractions wanted Rs.600 crore for the brand, one of the two added.

The purchase of Indulekha will help HUL, the local unit of Anglo-Dutch consumer goods maker Unilever Plc., re-enter the lucrative market for hair grooming oils.

The company exited the business in 2006 by selling its coconut oil brand Nihar to Marico Ltd. Smaller rival Emami Ltd, the maker of Emami Navratna hair oil, strengthened its position in the Ayurvedic hair oil business with the purchase of Kesh King brand for around Rs.1,650 crore earlier this month.

“There is a lot of excitement around personal care categories and the growth prospects are very encouraging,” said Arvind Singhal, founder of Technopak Advisors, a retail consultancy. “Of all the sub-categories relating to grooming, hair oil is the smallest and hence it is difficult to find justification for the extraordinary premium being asked or paid for the same, even though the profitability of companies such as Kesh King is indeed extremely high.”

Kesh King, a brand owned by the Chandigarh-based SBS Biotech Ltd, was valued at more than five times its annual sales of Rs.300 crore. In comparison, Indulekha, a popular brand in South India, has an estimated annual sales of Rs.150 crore, according to a November report in The Times of IndiaMint could not independently verify this figure.

If the negotiations are successful, HUL will buy all products under the Indulekha brand, including Bringha Ayurvedic Hair Oil, Bringha Selfie Bottle Hair Oil, Coconut Milk Shampoo, skin care oil, skin care cream and Acrot Natural Face Mask, the second person added.

The coconut-based hair oil market accounts for 43% of theRs.8,700 crore overall hair oil market in India, the second person said.

Hair oil is often the first hair care product used by women and any company wishing to sell hair care products must have a presence in this segment, said an analyst who asked not to be identified. In 2013, HUL launched Dove Elixir, a premium hair oil. Rival L’Oréal sells hair oil under all its major brands including Keratase, Matrix and L’Oréal Professional, the analyst added.

Investment banking firm Anand Rathi Financial Services Ltd is advising Mosons, the first person said.

“We will conclude a deal with a potential investor after reaching a consensus on valuation of the brand,” said Afnas P., chief executive officer of Mosons Extractions. He declined to share further details.

A spokesperson for HUL declined to comment.

Hair care was a Rs.17,102 crore market in India in 2014, Bajaj Corp. said in an investor presentation, citing figures provided by market researcher Nielsen. Out of this, shampoo was the largest segment at Rs.5,217 crore, followed by perfumed oil at Rs.4,996 crore and coconut oil at Rs.3,786 crore.

“The hair-oil category has, in the past, shown a strong regional (rather than a national) play, though there are exceptions like Marico and Dabur, which have national brands for hair oils,” Singhal said.

Companies that own regional brands prefer to sell them to companies with a wider distribution reach, said Mahesh Singhi, founder and managing director of Singhi Advisors, an investment bank.

“Regional firms prefer to sell established regional brands either to large Indian companies or an MNC that can leverage its existing reach and channels,” he added.

See Article: http://www.livemint.com/Companies/bDVsWhz0pk180hLOWGybML/HUL-in-talks-to-buy-Keralabased-Indulekha-brand-for-Rs500-c.html